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Saturday, June 30, 2012

I crossed borders five times, four times thereof with border controls. That meant four times showing papers to exit officials and four times showing papers to entry officials, watching them while they got their routines done (and eight times waiting in line to get to those officials).

Only three of the countries had their own currencies (FYROM, Serbia, Croatia). Still, that meant paying tolls in a currency whose name I didn't recall much less know its value. Thanks to credit cards, I didn't have to fool around with local currency cash too much but, still, I would have liked to know how much I was spending for gasoline and for shopping at the station stores.

In Slovenia, I recognized the currency again - the Euro. And when I crossed from Slovenia into Austria, I even overlooked the border because there wasn't much of a sign.

Now, convenience has its price. Since I overlooked the border into Austria, I also overlooked the office where one buys the toll vignettes. So, I only recognized that I was back in Austria when the Austrian police stopped me for not driving with a vignette and charged me 120 Euros for it. Well, I guess everything has its prize, even belonging to the EU does.

Having described this, does anyone really want to leave the EU and/or the Eurozone???

If and when (or only when?) the moment of truth comes and Germany has to take its losses on Greece, those losses will easily exceed 100 BEUR.

What would this mean?

It would mean that Germany has been sending exports to Greece free of charge since Greece joined the Euro. At the same time, these exports - everyone argues - contributed so much to the well-being of the German economy during this time. Now: if these exports would in the final analysis not get paid for but they, nevertheless, contributed so much to the well-being of the German economy, there can only be one conclusion from this regarding the future:

CONTINUE TO EXPORT TO GREECE LIKE MAD BUT TO AVOID A FUTURE FINANCIAL MESS, DO IT FREE OF CHARGE FROM THE BEGINNING!

I have commented before that Mr. Soros' claim to fame is that he once blackmailed the British government and --- succeded! There is no doubt about the fact that Mr. Soros is an exceptionally brilliant mind and that, once he had acquired wealth, he put some of that wealth to charitable uses. Nevertheless, there is also no doubt about the fact that he owes his entire wealth to speculative investments, i. e. to the trading in abstract financial instruments.

No such abstract financial instruments could exist and no George Soros could acquire wealth in trading them if there were not a real economy somewhere out there. An economy where people spend a decent day's work to do/create something which is of enough value to others so that they pay them a salary and/or price for their products and services.

The only difference between George Soros and someone like Gordon Gekko is that Mr. Soros is an exceptionally well-educated man, a very cultured person and probably someone with a (guilty?) conscience. If not the latter, he wouldn't feel the need to give some money back to the society which enabled him to take it away from it.

Should Gordon Gekko be a role model for the next generation? I guess everyone would agree that not. Should George Soros be a role model? If yes, then only because he has better education, more culture and better manners than Gordon Gekko. But as far as the substance is concerned, he is no different from Gordon Gekko. Gordon Gekko would have driven a lot of airline employees into unemployment. George Soros caused a lot of financial loss to a lot of British and damaged British feelings of dignity like few others in modern times.

How about Warren Buffett as an alternative to George Soros. After all, Buffett, too, accumulated enormous wealth. The only difference is that Buffett did not make his money through the trading of abstract financial instruments which would not be possible without a real economy. Instead, Buffett made most of his money in the real economy by investing in value-creating businesses and giving them the financial resources to expand their businesses (and their value-creating...).

I think we would all be better off if the frontpages of financial media were occupied by the opinions of those potential role models who have indeed created tangible values for society. Who are they? They are the entrepreneurs and businessmen (and -women!) who have found a place between customer needs and their businesses' capabilities to create new jobs. Jobs which allow their holders to support a decent standard of living; jobs which pay a fair amount of income taxes; jobs which enable the businesses to pay a fair amount of corporate taxes; and jobs which allow the owners of those businesses to pay a fair amount of dividend taxes! Finally, jobs which eventually allow the states to generate enough revenues to pay for all the services which they wish to provide to their societies.

Where are these role models? Only in Germany, perhaps? No, they are in EVERY society and I have no doubt about the fact that they are also in sufficient quantity in Greece!

Unfortunately, answers can never be better than the questions asked. I asked a staff member of the EU Commission whether these data included all transfer to, say, Greece. The answer was "yes". I then asked why the agricultural grants were not shown. The answer to that was: "That information you get from the responsible Directorate General".

Have fun looking for the names of personal friends as beneficiaries...

The next few weeks will probably teach us all a thing or two about negotiating strategies and tactics. Right now I would say that either the home team will win or the visiting team, but there won't be a draw.

The new government has published the position with which it will enter negotiations. The following statement caught my immediate attention: "The three parties also agreed against any sackings in the public sector". There were several other points where my gut reaction was that they would cost quite a bit of new money.

The Troika's position, so far, has been confusing, but what else would one expect from the Troika? A clear "njet" has been voiced here and there but it really didn't sound like a clear "njet". And the more common reaction was that there may be preparedness to lengthen some of the time frames. But, of course, "no changes to the substance".

It seems to me that there are oceans between these two positions which neither side can afford to bridge. At the same time, neither side can afford to come away from the (re)negotiations with a significant loss of face.

Chances are that, at the end of the day, we will have some form of new agreement about which both sides will be very proud. How they get there will be fun to watch!

Saturday, June 23, 2012

I have a friend who was born and raised and formed and shaped in the American Mid-West. Common sense pure. We both worked many years for one of the US money center banks headquartered in the Mid-West. For a few years he was my boss. During the 1970s, he spent a few years running the Greek operations of this bank (3 branches). After retirement, he returned to his small hometown in Wisconsin where his family owns a community bank which he still runs today. A community bank takes in deposits, makes loans and provides banking services to customers. Actually, not a bad business model for a bank...

He recently asked me the following question per mail:

"For me, I can't understand really why everyone doesn't
just face the facts, default on debt and get out of the Euro. Yes, I understand that much of the debt is
held by banks and they would like to delay taking their medicine, but sooner or
later they are going to have to recognize reality. Some of these countries simply don't have the
means, or the stomach, to meet their obligations. Perhaps you can educate and enlighten me".

I enlightened him that such basic common sense is not part of the repertoire of EU-elites. And recognizing reality would be far too simple and unsophisticated an approach for EU-elites who pursue much greater and nobler goals! (like saving the Euro and the Eurozone...).

The intellectual war over which economic policies ought to be pursued (and which other ones are plain stupid) is being won by those wise men and women who consider everyone else plain stupid. Hands down! Whenever the likes of George Soros, Mohamed El-Erian, Paul Krugman, Wolfgang Münchau, Thomas Fricke, Yanis Varoufakis (to name just a few) bless the world with their latest thoughts, one almost feels that one ought to stand attention in the face of so much intelligence and wisdom. And they all have the ability to make you feel dumb if you don't share their opinion.

Prof. Krugman Himself recently felt that the time had come to declare Greece as the victim. Shame on everyone who could not immediately see his point. A young Greek blogger didn't quite agree with his analysis and dared to write a piece where he took apart much of what the Nobel Prize Winner had said. Refreshing!

The French/UK writer Philippe Legrain called the publisher of Die Zeit, Josef Joffe, "monstrously stupid, economically illiterate and a moron". Why? That apparent master of ignorance had dared to write a piece in the Financial Times suggesting that Europe was perhaps not witnessing extreme austerity yet.

I recently wrote a piece on the hubris of Prof. Yanis Varoufakis where I criticized him for only talking about the EU's responsibility for fixing problems without making a single suggestion what Greece could do on its own to improve its situation. Instead of disagreeing with my criticism, Prof. Varoufakis confirmed to me "Dear Klaus, you are
right. I am intentionally ignoring all treatises how to fix Greece. As
long as it is the first carriage on the train derailment that is the
eurosystem, Greece cannot be reformed. It is like asking Ohio in 1930
how it could escape the Great Depression by its own means. It could not.
Period. As for hubris, it appears to us the audacity with which some
Europeans keep blaming the canary for the methane leak and explosion”.

There was an INET-Conference in Berlin in April where the IQ of those attending must have averaged in stratospheric levels. The majority seemed to be completely like-minded in their attempts to promote "new economic thinking". When someone wasn't so like-minded, like the former Chief Economist of Deutsche Bank, whose additional handicaps were that his English wasn't very classy and, God forbid, that he was/is a German - well, one almost had to feel sorry for such an outsider. The Chief Economist of Financial Times Deutschland had it much easier. Since he has credited himself for having introduced new economic thinking in Germany, and since he obviously felt that everyone attending shared that feeling with him, he didn't have to use his time to make much of a presentation. Just chatting a bit about this, that and the other was naturally good enough. Poor former Chief Economist of Deutsche Bank! What a small thinker! He had really prepared something like a dissertation! Obviously, not a cool type!

The very last speaker was a former Finance Minister of Chile, Prof. Andres Velasco. Now, just to listen to his presentation would have made it worthwhile to attend the 3-day affair. Given that he was the last one to speak, one wonders how many still listened to him. They should have!

None of the reforms which EU-leaders had expected the periphery to make once they joined the common currency took place because, according to Prof. Velasco, "when you fix your exchange rate (i. e. join the Eurozone), you look very safe to the world, people want to lend money to you, asset prices rise, credit is plentiful, and whoever saw a country reform when money is everywhere. When you are floating in Euros, you don't reform. Think of Greece, think of Belgium, think of Spain, think of Italy, think of Portugal!" Velasco 1, Soros 0.

Prof. Velasco had the nerve to state that the Eurozone was not really experiencing "much of a crisis" yet. "The very essence of a crisis is a sudden stop in capital flows. You are going along merrily but suddenly people stop lending to you. As a result, and if you are running a large current account deficit, you have to close that deficit overnight, you cut imports massively and you go into a huge recession. Well, Europe has been in a crisis for 4 years but Greece, Italy, Spain and Portugal still have current account deficits over 4%. So the basic requirement of a crisis has never happened here. Which, by the way, is perhaps an indication that German citizens have perhaps not been quite as ungenerous as some people in this meeting made them out to be because somebody has been lending to these countries".

Regarding the current situation where countries of the periphery are told to become competitive, Prof. Velasco warns that "you really have to watch out for the real exchange rate. When a country like Greece, which has had a massive recession for 4 years and unemployment around 20%, still has massive external deficits, then that country has a real exchange rate problem. What does the economic literature have to say about such situations? I am sure that this will be unpleasant music to most ears - it is very, very, very hard, perhaps even impossible, to carry out a large real exchange rate depreciation without touching the nominal exchange rate".

Prof. Velasco laments that today's wise men and women have not taken any lessons from the experiences which countries outside of Europe and the USA have had. He says fittingly "the sociology of economic thinking is such that if it happens in Chile, if it happens in Taiwan, etc., it is not worth thinking about. So", Prof. Velasco concludes with a recommendation for INET, "you should have a subsidy for the writing of new papers but you should also have a subsidy for the reading of old papers!"

It is not known what George Soros thought of Prof. Velasco's speech but, then, he and his like-minded thinkers may already have been discussing new economic thinking amongst themselves at the bar while Prof. Velasco gave his talk.

The discouraging fact is that - as before - after 3 or 4 years of crisis and
so-called austerity measures, Greece as a country is still spending
1.330 Euros abroad for every 1.000 Euros earned abroad. That is a 33%
excess of spending over income. This is much worse when only considering
the trade account where Greece is importing 2.090 Euros for every 1.000
Euros which it is exporting!

Two questions stand out.

First, as encouraging as it is to see Greece's exports increasing, the Euro is now near its lowest level versus USD and other currencies since 2008. Could Greece really not make more of an effort to take advantage of this situation and market its exports specifically to non-Euro markets?

Secondly, have structural reforms been made to make sure that imports will not explode again if and when the economy picks up again? The Bank of Greece's answer to this question is "no".

Wednesday, June 20, 2012

I suppose some people will judge the new government by how tough it acts versus the Troika and by the concessions which it achieves. Others might judge it by the how much it can raise minimum salaries and pensions. And so forth.

For my part, I will look for certain soundbites and if I hear them, then I will start believing into a future for Greece. Some of these soundbites would be:

We will create new jobs through import substitution!
We will weaken the import lobby and strengthen the export lobby!
We will do everything to attract foreign investment!
We will privatize primarily for the sake of getting private know-how transfer to Greece!
We will fully use the resources of the EU Task Force to get Greece's public administration into shape!
We will use the advice of the EU Task Force in formulating an overall tax reform!
We will carefully examine proposals like the Greece Ten Years Ahead or EURECA!

I could go on and on with more soundbites but, frankly, if I were to hear only the above, I could quickly become bullish again about Greece's future!

PS: and perhaps the new government wants to copy some of Alexis Tsipras's soundbites such as the "National Plan for Reconstruction and Growth"; or "ending Greece’s corrupt and inefficient
political and regulatory systems"; or several of the others which sound great but which must be implemented, too.

I have written several critical comments on Mr. Samaras and the question is valid why one had to expose the country to so much political stress in the last 6 months (on top of the economic stress) when one could have had the same result 6 months ago (or even 12 months ago) just for the asking.

However!

A new start is a new start. All old debts and friendships should be cancelled. The new team should be given the benefit of doubt. And --- they will need all of it!

What would I expect from the new government? First of all, they should communicate more what they are doing for the good of the country! For over 2 years now, we have heard more than we ever wanted to hear about things like memoranda; percentages of this, that and the other; measures for this, that and the other; etc.

Has anyone heard of the vision for the better Greece which allegedly everyone is working for day-and-night? Has anyone heard a speech which said "this is where we were; this is where we are now; and this is where we plan to go"? Can the normal Greek citizen have any idea that there is a light at the end of the tunnel and what progress is being made getting there? I doubt it very much!

When corporations get into financial trouble, it is customary that communication between managements and employees intensifies. Everyone knows that employees must be given some clear ideas as to where the journey will take them so that they don't jump ship and work for competitors. Citizens cannot jump ship and work for competitors (unless they decide to emigrate) but they have the same right to be informed nevertheless! In the longer run, one cannot expect people to make sacrifices if they have no idea at all what they are making them for.

So, and without suggesting that Greece should expand the public sector, perhaps a new communication/marketing department should be established in one of the ministries with the mission of keeping people informed how their sacrifices make sense and why there is a light at the end of the tunnel (and possibly even when).

Suppose the half-time score is 0:1 when Greece plays Germany on Friday, and the Greek players are already quite exhausted at half-time. They know, however, that they need to run like hell if they still want to advance. They are close to break-down when they score the 1:1 but that gives them renewed energy to keep running because they know that they only need one more goal. And before they all collapse, they score the 2:1. That's when they know that it was all worth the trouble!

Tuesday, June 19, 2012

The World Bank/IFC publish regularly reports about the ease of doing business in over 180 countries of the world. A high ranking on the ease of doing business index means the regulatory
environment is more conducive to the starting and operation of a local
firm. This index averages the country's percentile rankings on 10
topics, made up of a variety of indicators, giving equal weight to each
topic. The latest rankings for all economies are benchmarked to June 2011.

Transparency International's Corruption Perceptions Index ranks countries/territories based on
how corrupt their public sector is perceived to be. A
country/territory’s score indicates the perceived level of public sector
corruption on a scale of 0 - 10, where 0 means that a country is
perceived as highly corrupt and 10 means that a country is perceived as
very clean. A country's rank indicates its position relative to the
other countries/territories included in the index.

The results of both analyses for EU countries are below:

Doing
Business

Corruption Perception

Country

Rank

Country

Rank

Denmark

5

Denmark

2

UK

7

Finland

2

Ireland

10

Sweden

4

Finland

11

Netherlands

7

Sweden

14

Luxemburg

11

Germany

19

Germany

14

Latvia

21

Austria

16

Estonia

24

UK

16

Lithuania

27

Belgium

19

Belgium

28

Ireland

19

France

29

France

25

Portugal

30

Estonia

29

Netherlands

31

Cyprus

30

Austria

32

Spain

31

Slovenia

37

Portugal

32

Cyprus

40

Slovenia

35

Spain

44

Poland

41

Slovakia

48

Lithuania

50

Luxemburg

50

Hungary

54

Hungary

51

Czech Republic

57

Bulgaria

59

Latvia

61

Poland

62

Slovakia

66

Czech Republic

64

Italy

69

Romania

72

Romania

75

Italy

87

Greece

80

Greece

100

Bulgaria

86

If Greece developed effective plans to move up to, say, the top-10 in each of these indices, I suspect a lot of things would turn to the positive quickly.

Monday, June 18, 2012

The World Bank/IFC publish regularly reports about the ease of doing business in over 180 countries of the world. A high ranking on the ease of doing business index means the regulatory
environment is more conducive to the starting and operation of a local
firm. This index averages the country's percentile rankings on 10
topics, made up of a variety of indicators, giving equal weight to each
topic. The latest rankings for all economies are benchmarked to June 2011.

My basic assumption is that the easier it is to do business in a country, the more business will be done in that country. If one were to disagree with that assumption, we would really have a disagreement. I am not saying that a high ranking guarantees success but I am definitely saying that a low ranking indicates that something is wrong at home. And that the fixing has to start at home and not abroad.

Below are the latest rankings:

Country

Rank

Denmark

5

UK

7

Ireland

10

Finland

11

Sweden

14

Germany

19

Latvia

21

Estonia

24

Lithuania

27

Belgium

28

France

29

Portugal

30

Netherlands

31

Austria

32

Slovenia

37

Cyprus

40

Spain

44

Slovakia

48

Luxemburg

50

Hungary

51

Bulgaria

59

Poland

62

Czech Republic

64

Romania

72

Italy

87

Greece

100

I hope I have made my point sufficiently clear that Greece MUST start doing something at home other than cutting purchasing power of those who are taxed at the source. It is urgent for Greece to make plans for becoming a better place to do business!

When a populist is demonized by establishment forces, one generally makes the mistake that one demonizes ALL of him. Put differently, if an idea was first mentioned by Alexis Tsipras, it has to be a bad one because of coming from him. Populists wouldn't get as many votes as Mr. Tsipras did (and so quickly!) if they didn't have good ideas, too. The establishment forces in Greece are well advised to take on Mr. Tsipras' good ideas. His best ideas are his soundbites about a new and modern Greece, and Mr. Samaras should copy some of them. His worst idea is how to achieve such a new and modern Greece and no one should copy that!

The key soundbite is that Greece needs a National Plan for Reconstruction
and Growth. The key mistake is to think of such a plan as a misunderstood version of the Marshall Plan where foreigners would dump more money on Greece in the hope that Greece will spend the money wisely. The Marshall Plan was not help per se; it was help for self-help. Greece needs help for self-help. If self-help is demonstrated, help will come quickly!

One often gets immersed in pro/con-argumentations while forgetting what one's original idea was. As I reviewed the evolution of my thinking over the last couple of years, I noted that two of my principal themes had been the following: first, stop using Greece's balance sheet (and tax payers' money) to bail out banks and call that "help for Greece"; and, secondly, develop a long-term industrial development plan for Greece.

In addition to the many articles which I have written, I have also made the attempt on several occasions to write to policy makers. I will list below the letters which I had written to Greek policy makers last year. Some of their content has meanwhile been superseded but I still stand behind the gist of them.

June 17, 2011 - Letter to Finance Minister George Papakonstaninou
The general idea of this letter was to come up with a plan which holds the promise of developing Greece into a value-generating economy and to use that plan as the "bargaining tool" to "call the bluff" of EU-elites where they argue they are helping Greece while actually helping the banks.

So, by and large, I have been making a similar case as some of the "radicals" are making today: don't allow yourselves to be driven but, instead, drive the show! There is only one little point which today's radicals refuse to understand, namely:

When you want to drive the show, you have to bring something to the party. A nuke is never the right present for a party. To use the words of the Godfather: you have to bring something to the party where the others cannot refuse to go along with you. And what could that "something" be? You are right ---

A Long-Term Industrial Economic Development Plan which aims at developing Greece into a modern, competitive and value-generating economy (and thereby creating the framework where the younger generation wants to stay in Greece instead of leaving it!).

The short answer to this question is: neither! Politics is neither a business for gratitude nor for uncivilized threats.

It is interesting to note that people who are farther removed from the blame-game are voicing opinions which would not be supported by a majority in, say, Greece. Fareed Zakaria, for example, wrote a piece for TIME magazine titled "Time to say Danke". In it, he says:

"Throughout the euro-zone crisis, it has
become conventional wisdom to regard the Germans as narrow-minded,
ungenerous and dogmatically wedded to prescriptions of austerity to
treat Europe's problems. Those criticisms are vastly overstated.
Consider that Germany is being asked to take its taxpayers' money--in a
democracy--and use it to bail out a country like Greece, which is guilty
of mismanagement, poor competitiveness and financial fraud. And it has
said yes! In return for this, Germans are being called Nazis in Greek
newspapers".

The Swiss Joseph Ackermann, after 10 years at the helm of Deutsche Bank certainly a connaisseur of Germany, says in an interview with Handelsblatt:

"...should Germany devote more resources to the survival of the Eurozone? The pressure on the Berlin government is growing, it doesn't only come from other European countries but also from the USA. Here are two facts: the American help for Mexico in the 1990s, of which the USA were very proud, represented 1,3% of the then American budget. The guarantees and loans which Germany has already committed represent 70% of the German budget. To explain to German tax payers that they should shoulder even more risk would be very difficult..."

"The EU has succeeded where Versailles and Potsdam had failed. The voluntary union brought peace to the Continent and created a stable framework for its diversity. That is the purpose of the European Union and not the recycling of money from North to South combined with strong disciplinary measures for the South. Europe's elites put this inheritage at risk when they break with European traditions and vote for fiscal uniformity and a single political standard".

All those Greeks who are voicefully calling for solidarity from other Eurozone countries (n. b.: but not calling for solidarity from their own non-tax-paying compatriots) should understand that there are natural limits to solidarity. That limit is reached when people feel that the principal of fairness is being breached.

Take Germany, for example. Germany has a fiscal union among its 16 federal states. At present, only 3 states (Bavaria, Baden-Württemberg and Hesse) are payers in the fiscal untion; 13 states are payees. The fiscal union treaty is up for renewal in a few years. Already the state of Bavaria is making noises that they are not prepared to renew it as it is. Why? Bavarians cannot understand why they should pay for social luxuries of Berliners when the only reason that they would have the resources to do that is because they cut those social luxuries for Bavarians.

Also, to pay for the cost of unificiation, an 8% tax surcharge was levied over 20 years ago, allegedly to last for only a few years. It is still in place today. Today, the infrastructure of most East German cities is better than that of some cities in the Western state of North-Rhine-Westphalia. Over the years, some West Germans have expressed their feelings that "the Wall should be built again".

My point is: even within one and the same nation solidarity can/will reach its limits when it violates the perceived principle of fairness. Not a chance of an icycle in hell that such solidarity can persist among different nations.

In conclusion: today is neither a day to say "danke" nor to call the bluff. Instead, it will hopefully be the beginning of the realization that there is no such thing as a free lunch and if the kitchen no longer produces lunches, one has to fix the kitchen.

Saturday, June 16, 2012

My last post prompted interesting comments through which I became more acquainted with dimiourgia, xana! I looked up their website and was floored: after so many populist soundbites over the last weeks, all of a sudden so much common sense and reasonableness!

Here is my suggestion to Alexis Tsipras:

Vote for dimiourgia, xana! and get your entire movement to vote for them so that they can form the next government on their own. Give them about 20 years' time. When they are done, you run for the office of Prime Minister yourself. You will still be younger than Andreas Papandreou was when he became Prime Minister the first time. And after 20 years of dimiourgia, xana! you will have so much of other people's money at your disposal that you can easily waste it for another 20 years and build your place in Greek history books!

Friday, June 15, 2012

In an article published today, Prof. Yanis Varoufakis concluded that "Greek voters today have a unique opportunity to jolt Europe out of a complacency that is leading our Continent to a despicable peripeteia".

My gut told me that there was something wrong with this conclusion and I turned to Wikipedia for an answer. Hybris, it is stated there, "means extreme pride or arrogance. Hybris often indicates a loss of contact with reality and an overestimation of one's own competence or capabilities,
especially when the person exhibiting it is in a position of power". Prof. Varoufakis has over 30.000 followers on Twitter (and when reading their comments one senses that they are indeed followers in the biblical sense).

I have been following Prof. Varoufakis' blog for about a year now. Notwithstanding
the many good ideas and suggestions which I have read about possible
solutions to the Eurozone’s problems, I have not read a single proposal
what Greece could do on its own to improve its bargaining power versus the EU (other
than being destructive). I have not read a single proposal what Greece could do on its own to improve its economic situation.

Prof. Varoufakis' blog ignores (I am beginning to believe “intentionally ignores”)
that by all measures of hard and soft facts, Greece has become a
terrible place to do business and a terrible place to leave one’s
financial capital. It ignores that a country with such characteristics has no economic future. And it ignores that such a country MUST do something about this on its own!

Characteristic of the wrong attitude is the emphasis on the errors
which EU-elites have made in the last 2 years (“…the past two years have been replete with a sequence of errors on the part of Berlin, Paris, Brussels and Frankfurt…”). Yes, they have not only
made errors but also giant blunders. But the primary concern to Greeks
should be that in the last 2 years virtually NOTHING has been done to
reform the country towards a better economic future. Sorry, a lot of
easy things have been done like cutting the purchasing power of those
who are taxed at the source and who have always paid taxes. One has
punished those who are least responsible for Greece’s mess today. What a
sorry result so far! (even though one’s heart should go out to those
poor suckers who are caught up in terrible games which their elites
play).

Those who have been very supportive of the Greek cause in the last 2
years have time and again been deprived of their arguments by actions
(or non-action) on the part of Greece. Those who are still taking the
position that Greece is NOT like a banana republic of the Third World
are continually being deprived of arguments. The latest blogpost of Prof. Varoufakis is but one
example.

A banana republic of the Third World may indeed consider it as
bargaining power that it has the nuke which can blow up both sides.
Greece should NEVER do that. Not only out of respect for the EU of which
it is a member but, above all, out of respect for its own ancestors who
taught the world what civilized behavior is!

A First World country shows its bargaining power by bringing
something constructive to the party. The first thing which Greece should
bring to the party is its commitment to perfect the State of Law in
Greece: a clear definition of properties and the rights and obligations
that go with them (real estate registry); powerful institutions of
impeccable standing; uncompromised law enforcement; clearly established
control authorities; a modern and effective public administration; etc.
Former President Nicolas Sarkozy, a friend of Greece’s, was once caught
saying that “there is no state of law in Greece”. Should that not have
been an alarm bell to Greek elites?

In day-to-day life in Greece I run into Greeks who are quite
different from those Greeks who appear in public, be they politicians,
opinion leaders, blog commentators or whatever. They are the kind of
people where the rest of Europe would have no problem at all to help
them reach a better future for their children. On the contrary, the rest
of Europe would feel obliged to do this. The tragedy is that they seem
to have zero representation in the public (even though I feel that they
are the majority).

There is allegedly an African tribe who follows the rule of “when in
trouble, ask yourselves what your ancestors would do”. All those Greeks
who seek public attention to teach the world that everyone owes them
something (except they themselves) should ask what their ancestors would
make of such behavior. Plato, Sokrates, Aristotle — what do you say?
“Don’t know thyself and blame others for it?”

I have not yet met a Greek who did not list among Greece’s greatest
problems the size and inefficiency of the public sector. And yet, many
Greeks can now arouse themselves for a party whose major objective is to
make the public sector even larger? What would Plato, Sokrates or
Aristotle have to say about this?

To all those who consider the future of Greece as subject for game or
bargaining theories I can only repeat the Greek proverb that “any fool
can throw a stone into the sea, but once he does, a hundred wise men
can’t pull it out!” If you want to go to the bargaining table with a
nuke in your hand, make sure the nuke is functioning well because you
will only be able to use it once.

I commend Mr. Tsipras for having started a movement. It requires
leadership talent to accomplish that. A country which is in as dire
straits as Greece is today requires something like a national movement
to “turn the corner”. Perhaps even a "new hero". Politics as usual won’t be enough. From that
standpoint, Mr. Tsipras and SYRIZA would have a unique opportunity to
steer Greece into a better future. What they require is advice how to
use this historic opportunity the right way. If influential opinion
leaders advise and encourage them to go down the wrong path, they do
enormous disservice to the country!

While I have changed my argumentation as things evolved, my general line
of thinking has remained unchanged, namely: Mr. Tsipras is an unusually
charismatic leader at a time when Greek politics are desperately short of
charismatic leaders; thus, he is a force to be seriously reckoned with.
Secondly, Mr. Tsipras makes exactly the type of soundbites which a society in
stress and distress loves to hear (and his opponents are dumb not to copy some
of them!). The fact that Mr. Tsipras doesn’t support his soundbites with hard
facts is not too surprising at this point. This is a political campaign and not a
PhD examination. Finally, Mr. Tsipras is only electable if he allows himself to
be advised that some of his soundbites must not be meant seriously. Here, Mr.
Tsipras does not leave the impression that he will allow himself to change his
mind and this is why he is not electable in my view. Below are the details.

1st, Mr. Tsipras calls for a National Plan for Reconstruction
and Growth. Wonderful! I have argued since the beginning that this is necessary
only that I called it a Long-Term Industrial Development Plan laid out for the
period of one generation. The idea is the same; we differ as regards
implementation. Mr. Tsipras seems to think that throwing other countries’
savings at the Greek economy and giving the state a predominant role in
distributing them would take care of all problems. I argue that only when other
countries’ investors start trusting the Greek economy to invest there can there
be a chance for a future.

2nd, Mr. Tsipras uses several other wonderful soundbites
which go down like honey. Such as: ending Greece’s corrupt and inefficient
political and regulatory systems that have ravaged the economy over the past
decades; averting the country’s evolving humanitarian crisis; creating a new
path to growth through transparent government; enacting a tax reform so as to
identify the wealth and income of all citizens, and to distribute equitably the
burden of taxation; etc. My ears can't get enough of such soundbites!

3rd, Mr. Tsipras outs himself as a fiscal conservative. He
calls for stabilizing public expenditure at approximately 44 per cent of GDP
and reorientating this expenditure to ensure it is well spent. This has been my point for ages. Mr. Tsipras also aims at increasing
revenues from direct taxation to the average European levels of 44% over a
four-year period. This, too, has been my point for ages. If you do the math, you will conclude that Mr.Tsipras plans to
balance the budget within 4 years!

4th, Mr. Tsipras apparently knows the difference between what
one shouts into public megaphones and what one communicates officially to
negotiation partners. Into the megaphones he shouts things like “declaring the
MoU null and void”; “calling Germany’s bluff”; etc. The small print reads quite
differently and more sensibly.

So, with all of those wonderful perspectives, why not go out and vote
for SYRIZA, give it an absolute majority and await the Golden Age for Greece?
(and for Europe, for that matter!).

As flexible as Mr. Tsipras is here and there, in one area he seems to be
totally unflexible if not so say ideologically dogmatic. He does not seem to
trust that “economic agents” will take the right decisions in a market-based
economy as long as the incentives/disincentives are set properly by the
government. Instead, he trusts the elected government more to take the right
economic decisions than the free economic agents. Privatizations will not
happen under his regime; instead, there will be nationalizations. The public
sector will not shrink; instead it will expand. Foreign investment will not
come; instead, it will depart. Capital will not enter the country voluntarily; instead, Mr. Tsipras thinks he can force it to come. Greece will not become a modern economy; instead, it will return to the
1960s.

Ever since I observed the unusual political talent of Mr. Tsipras
emerging, I had been hoping that someone might persuade him of the following:
the future of Greece will depend on allowing the Greek people to unfold their
willingness to work hard, their creativity and ingenuity, their power of improvization,
etc. – to allow those forces to play out in as unhindered a fashion as
possible. To entrust the future of Greece into the hands of politicians and
bureaucrats, to rely on their creativity, ingenuity and power of improvization is
what will return Greece to the 1960s.

So what do you prefer for your children? The 2020s or the 1960s? There is more than half a century between the two!

To me, the most important figure coming out of next Sunday's election is the voters' participation. The last time it was allegedly rather low. Whatever the highest voters' participation which Greece ever had is, I would expect that Sunday's participation ought to come very close to it or even exceed it. This may turn out to be the most crucial vote in modern Greece and Greeks MUST demonstrate that they are prepared to take part in the decision-making.

Secondly, the last time votes for parties which did not make the 3% hurdle came to about 19% of the total. This means that 19% of people who excercized their right to vote would not be represented in the parliamentary decision-making (and the threshold for a coalition government declines). To me, the lesson of this is that voters should only consider parties which have a realistic chance of making the 3% hurdle. This is no time to waste votes!

Finally, I think Greeks should avoid tactical voting. I recently heard the following comment: "I now have to vote for this idiot Samaras so that we don't get this idiot Tsipras!" My suggestion to this person would be to vote for neither and figure out which of the other candidates might be better.

Wednesday, June 13, 2012

Something is not playing out according to the rule book. The purchasing power of Greeks has now shrunk for about 2 years and as far as recipients of salaries & pensions are concerned, their purchasing power has declined massively. One would think that with such a huge decline in demand, prices would go down, too; right?

Wrong! To the extent that I can judge prices in stores, supermarkets, restaurants, tavernas, fast-food places, etc. - I don't recognize a deline relative to two years ago. In fact, sometimes I wonder whether prices haven't even gone up.

Maybe I am reading the wrong papers but I have not read a single article todate which would explain why this is so.

PS: somebody must be making a killing! If a business could reduce its wages & salaries as much as happened in Greece but could maintain its sales prices and business volume, its profit must be increasing quite impressively.

Monday, June 11, 2012

This is an interview which EU-authorities should read very carefully. The interviewee is Mr. Yiannis Dragasakis who, I take from the article, might become Finance Minister should SYRIZA be able to form a government after June 17.

Mr. Dragasakis does not talk like the hot-blooded Sonny Corleone's of Greece who have recently rejoiced in "calling Germany's bluff" or declaring that they would reform the EU into the kind of EU "which Greece wants to have". Instead, Mr. Dragasakis talks more like the Godfather himself: "I'll make you an offer which..."

Note the following sentence: "It is self-evident that Greece’s relationship with the European Union is
not an external relationship but a multifaceted one of structural
interdependence between our country, EU institutions and member-states.
Consequently, under no circumstances can we imagine a resolution of
problems arising from conflictive procedures instead of consensual
agreements". Hear, hear - no immature threats like some Greeks have come up with of late! (even renowned university professors!).

Or this one: "I would be surprised to face a stance that seeks to maintain
the current impasse or make it even worse by cutting our credit lines.
On the other hand, you are right to suggest that we should have suitable
contingency plans for any eventuality in order not to be caught
unawares. It’s good to have such plans without publicising them too
much". This sounds like the Godfather wishing the Turk good luck with his new business in narcotics...

Mr. Dragasakis would not declare a moratorium or a unilateral default. No, not at all! However, "if a situation arises for which we are not responsible,
but one which jeopardises our national or social security, the
government will not hesitate to take all necessary and feasible
measures, even beyond the constraints of formal legitimacy". "I hear you talking" is all I can come up with for that one.

And then, towards the end of the interview, he blows it. When asked whether he would seek the aid of the ECB to continue to fund the Greek banking sector, he answers as follows: "Financing the Greek banking system through the eurosystem is a
paramount obligation of the ECB and national central banks which
provide the liquidity necessary for eurozone economies to function
properly. It’s not some sort of charity that the ECB grants to eurozone
states whenever it so pleases".

Sorry, Mr. Dragasakis, this is where you are wrong, and you know it! The ECB is obligated to finance the Greek banking system (and the others) within collateral regulations. The Greek banking system has run out of collateral normally required a long time ago. I would not call it a charity on the part of the ECB to have continued to finance the Greek banking system without adequate collateral. The ECB didn't do that simply because it wanted to be nice to Greece but because not doing it would not only have brought down the Greek economy but would also have been a substantial threat to Europe's economy.

So, Mr. Dragasakis, you not only make friends and gain respect when you act like the Godfather instead of his son Sonny but also when you appreciate help where such appreciation is justified and even called for. The Godfather always thanked people for their favors and even suggested that he might never ask a favor from them in return.

Two major forms of bank bail-out's have emerged over the years: a more cumbersome one and a more simple one.

The more cumbersome way
This works as follows: a bank is split into a good and bad bank. The old shareholders keep the bad bank and, as an incentive to go along with the plan, they get a small portion of the good bank.

The good bank is capitalized by the rescuer (typically the government but not necessarily) and dressed up for the wedding, i. e. for the sale back to new owners. That sale will lead to one of two things: either it generates more money than the capitalization had required or less.

The assets of the bad bank are liquidated in orderly fashion. In all likelihood, the shareholders' equity will be wiped out in total. Typically, there will be an additional loss for the rescuer because the bad bank's assets are worth much less than its liabilities.

If the profit on the sale of the new bank exceeds the losses taken on the liquidation of the bad bank (after wiping out shareholders' equity), then the rescuer has made a profit. Typically, the rescuer will make an overall loss but that loss is typically far less than in a bankruptcy scenario.

The more simple way
The rescuer (typically the government) takes preferred stock in exchange for his recapitalization. The deal is structured in such a way that the rescuer gets a preferred rank over existing shareholders to compensate for the new risk he is taking. If the rescue works successfully and normality returns, the rescuer sells his preferred stock, hopefully at a profit. The stock of the old shareholders is probably worth a lot less than before but at least it is still worth something (and it now has the perspective to increase in value again). This is what the US government did with US banks after the 2008 crisis (and similar to what Warren Buffett did with Goldman).

The Greek and Spanish bank bail-out's differ from the above practices. The ultimate rescuer is the ESM but it does no invest capital nor does it get preferred stock. Instead, it lends money to national entities in Greece and Spain so that those, in turn, can do the recapitalizations. How they do that is not yet clear to me but I have to assume that they get some form of stock in the rescued banks.

The critical question is the following: will the ESM, as a lender to national intermediaries which bail-out national banks, get as collateral the new bank stock issued? For example: the Hellenic National Stability Fund will put fresh capital into, say, Eurobank and get preferred stock of Eurobank. To finance this, the HNSF will obtain a loan from the ESM. Will the HNSF assign to the ESM its preferred stock in Eurobank as collateral or not?

Saturday, June 9, 2012

George Soros has made a prediction. Again. EU-authorities have a 3-month
window to correct their mistakes; or else! To Soros, it is clear what is needed: a European fiscal authority that is able and willing to reduce the debt
burden of the periphery, as well as a banking union.

Mr. Soros is undoubtedly a brilliant mind but as opposed to brilliant
minds who come from academia, he is a brilliant mind who comes from the hedge fund
industry. His claim to fame is having once successfully blackmailed the UK government.
Would you entrust such a man the future of Germany’s tax money and bank
deposits?

It is safe to predict that we will neither see a European fiscal
authority nor a banking union in the foreseeable future, and that is good! The EU has enough institutions to solve its problems. What the EU lacks are political leaders who are pepared to call a spade a spade and to define problems in simple language. To
stay with the language of hedge fund managers: there is always an underlying
and a derivative. In today’s Eurozone crisis, the debt problems are the derivatives.
The underlying is how some of the deficit economies work.

Take Greece as an example. After 4 years of crisis with dramatic
declines in the level of economic activity (including a decline in imports from
64 BEUR in 2008 to 47 BEUR in 2011), Greece still ran a current account deficit
of 8% in 2011. For 2012, it is likely to be lower but still well over 5%.
Greece is still spending 1.380 Euros abroad for every 1.000 Euros it earns
abroad. At it is importing even 2.205 Euros for every 1.000 Euros it exports.
The numbers for Spain and Portugal are similar.

The problem is that financial markets do not see today how the underlying of
the Eurozone in its present structure can work again. The levels of competitiveness
are too different between the Core and the Periphery. And as a result of this
uncertainty, markets speculate with the derivatives.

The wonderful thing about a plan is that if it credibly points towards a
light at the end of the tunnel, towards a turn-around from current chaos, then
markets will cease to speculate against it.

Such a plan for the Eurozone must focus on bringing the flow of products, services and capital back in balance again. Free market forces alone
will not achieve this because in a country like Greece, the free flow of imports
into and the free flow of capital outside the country have ruined the economy.
Instead, there will have to be – at least for a certain transition period –
very strong incentives and disincentives to achieve the desired results. How
that could be done should occupy the most brilliant minds.

The idea that surplus countries transfer money to, say, Greece so that
Greece can import all the products it wants to have and that Greeks can
transfer all their savings abroad – that is not a workable idea for either the
surplus countries nor for Greece. Surplus countries simply will refuse do to it
forever and Greece has deserved better than to assume the role of the recipient
of donations from others.

Greece ranks as the EU’s least attractive place to do business (World
Bank) and as the most corrupt country (TI). The overall objective of a new
business plan would have to be to dramatically turn these two ratings around. Greece
would have to start new production for import substitution. Financing should come
from private foreign investment. The latter, of course, will only come if
Greece becomes an attractive place to do business and less corrupt.

One cannot change an entire country from A-Z in a short period of time.
One can, however, start from scratch in selective areas and wherever one starts
froms scratch, one can start the right way. Special Economic Zones would be the
right instruments for facilitating “new economic beginnings” in parts of Greece.
If they work well, they will rub off on the rest of the economy over the years.

The surplus countries won't be able to have the cake and eat it forever, and Greece will not forever have food if it doesn't start baking cake on its own. These could actually be very good times for the Eurozone: the Euro has lost about 25% of its value in a rather short period of time. The Eurozone should normally be spending its time figuring out how to take advantage of this new competitiveness in world markets.

Instead, the entire focus is on financial acrobatics and Mr. Soros makes sure that it stays that way. Perhaps the brilliant hedge fund manager has a financial position to protect.

Wednesday, June 6, 2012

The geopolitical importance of Greece, once very significant, has been played down since Greece joined the EU. Mr. Kaplan makes the case that "from the point of geography and geopolitics, Greece will be in play for years to come".

Monday, June 4, 2012

Prof. Yanis Varoufakis makes a powerful argument why one should vote for SYRIZA without reading its Economic Manifesto before, which led to the following exchange:

Klaus Kastner
Please allow me to quote Nikos Tsafos from the Greek Default Watch blog: “Greece has changed from being a fat kid that was going on a diet to a
fat kid that wants to sue the candy company. In the end, the fat kid
may get a check – but will he get any thinner?”

And here is a Greek proverb which I picked up recently:

“Any fool can throw a stone into the sea, but once he does, a hundred wise men can’t pull it out!”

I rest my case.

Prof. Varoufakis
Don’t rest your case quite yet. Thinking of a country as one person, or
kid, is unhelpful and dangerous (you would not like it if I thought of
Germany as one person; for that person would probably be hideous to you,
if verging on the ‘representative German agent’). I know lots of Greek
children who found it damn hard to survive in Greece during the ‘good’
times. Who worked during the day in garages and restaurants and went to
night school. Now, they have to pay the price of austerity. Be careful
Klaus. I expected more from you.

Klaus Kastner
I would not have seen anything offensive in Nikos Tsafos’ quote
(BTW, I consider his as one of the best blogs on Greece!) but if others
did, I apologize. Actually, I was under the impression that economists
like to use metaphors like “fat kid”, “minotaur”, etc. and I, for one,
find metaphors useful. As per your request, I won’t rest my case there
and since you expect more, I will deliver more.

Your statement that some children did not have a party during the
party years triggers deep feelings on my part. Indeed, not all Greek
society had a ball while seemingly all Greek society had a ball and,
indeed, those who had less of a ball then (or none at all) have now been
asked to participate unduly and unfairly in the repair cost of damage
with which they had little or nothing to do!!! Yes, today misery is over
segments of Greek society and financial stress and emotional strain
over a large part thereof. BUT: there is, in my judgment (and remember
that I spend close to half a year in Greece), quite a large part of
society which even today is having a very, very good life. And I am not
thinking of the ultra-rich Greek families. I am thinking of the “smart
and clever ones”.

The Gran Masoutis nearby is packed with shoppers (and prices are no
less than 3-4 years ago if not higher, and many are higher than in
Austria). Whenever I stop by IKEA, I hardly need to move on my own.
People traffic carries me with it. On weekends, the parking lot of
Cosmos Mediterranean (the largest I have ever seen) is full and the
place is packed with families paying the same prices for fast food as in
Munich. As the weather gets better, the weekend convoy from
Thessaloniki to Chalkidiki is getting under way again (I just returned
in bumper-to-bumper traffic). I could go on.

And then I read that a young couple living on a teacher’s salary has
to get by with 588 Euro net every month! Nice guys finish last? Well,
there are a lot of nice guys in Greece but there are also a lot of fast
movers who are not paying their traffic tolls. In my judgment, one part
of Greek society has taken the other part for an unbelievable ride since
the EU and particularly since the Euro.

And here is my case now: who can/should fix all of this unfairness in
Greek society? The Troika? The EU? George Soros maybe? Only Greeks
themselves can fix domestic issues within their own jurisdiction and
exactly this is what Greek brainpower should be concentrating on. Leave
the Eurozone’s problems to Eurocrats. They will fix them or not (I lean
towards the latter). But take on Greece’s problems and suggest ways how
they could be solved!

I could give you an endless list of issues which Greece could/should
tackle on its own. My blog is full of them. Just take the decline in the
Euro as one example. Here the Euro (including the Greek Euro) has
declined versus the USD by about 25% in a reasonably short period of
time. Presumably also versus other currencies. Now if that is not a
window of opportunity for increasing exports to non-Euro countries then I
don’t know what a window of opportunity is. I am not even sure if
Greece’s policy makers have noticed that exports have increased but they
certainly have not done anything to “make a killing” out of such a
window of opportunity. Attracting tourists from non-Euro countries might
have been a smart idea at a time where Eurozone tourism is tanking.
Etc., etc.

Now to Alexis Tsipras and SYRIZA. I have sent you links privately. Here is my post after I read the Economic Manifesto.

To recommend not to read a party’s manifesto but recommend to still
vote for the party is not my idea of responsible voting recommendations.
I would very much recommend to read the manifesto because I think it is
a very interesting document which deserves a lot of credit for certain
things.

I myself could not vote for SYRIZA because a vision where the
predominant role of the state provides for happiness of the people is not mine,
but I can see why others would have a different vision. But I am getting
to the point where I think that it may indeed be best if the next Prime
Minister with a stable majority would be Alexis Tsipras.

Best for the Eurozone because it would force EU-elites to either fish
or cut bait. And best for Greece because it will tell Greeks how much
the Eurozone likes them (or not). At least, all this meandering of the
last 2-3 years would be over. But then again, who am I to say that, with
Alexis Tsipras, the meandering would be over???

If there are more instalments to this exchange, I will insert them here.

Sunday, June 3, 2012

The day started with bad news all over the internet. The coming week was going to be the week that mattered; the end was near.

Then we drove from Thessaloniki to Makrygialos where a cousin of my wife's has a small farm. Nearby, his friend and interior designer has a palace. My wife's cousin is approaching the mid-fifties; he has been in retirement since his mid-fourties. Coming from a poor village background, he had started his own textile manufacturing company where, he says, he worked like a horse for over 20 years. He sold his business, invested in real estate and now lives off rent. And not bad.

The small farm is in a location which could just as well be the Toscana. Absolutely charming with a view towards the sea and Mount Olympus. Other friends gathered. Three retired men and a lady who owns a pharmacy. None of them have anything to worry about.

Before lunch, we drove over to Katerini to visit the new Mikel coffee shop. It is the newest unit in the Mikel franchise chain and the cousin's friend had done the interior designing. Everything absolutely first class! (including the coffee!). And prices not even unreasonable. I heard that daily sales were over 3.000 Euros which comes out to about 100.000 Euros per month. Wait, 100.000 Euros per month? Who has all that purchasing power?

For lunch, we drove to a fish restaurant by the beach. The interior designer was, of course, well known there. The restaurant was full. Food and drinks were served in typical Greek quantities (and quality!). The bill was 25 Euros per person.

On the way back to Thessaloniki we passed a delivery truck carrying about 10 new Mercedes cars. And on the ring road around Thessaloniki a brand-new Porsche honked nervously because I had slowed down his speed. So I moved my Hyundai i10 over and let him pass.

All in all, a very nice day. Economic crisis? What crisis? Oh, that crisis!

Saturday, June 2, 2012

"It is for you that we all embark on this struggle! To put shoes
on your feet, food in your children's mouths! We are fighting to change
your life, to raise you up from poverty and humiliation, to make you
men!"
Greek patriot in early 1940s

I had to think of the above when I read through SYRIZA's new Economic Manifesto (n. b.: I used Google translation, so I may have misunderstood details of the Manifesto but I think I got the overall message pretty well).

In general, I found Alexis Tsipras' presentation an arousing document. It included all the right soundbites which a domestic audience suffering pain and humiliation likes to hear. The presentation could have aimed at arousing people against some new enemy, for example foreign powers. It didn't do that and this deserves a compliment.

Mr. Tsipras begins by explaining in detail what SYRIZA means by an Economic Manifesto, by a program. They mean values, principles, clear guidelines, fixed lines, etc. He contrasts that beautifully with, say, Mr. Samaras' habit of shouting out 18 action steps or the like. And he even used the famous Churchill phrase "Who, if not us? When, if not now?"

If Thomas Jefferson had held in impromptu speech early on during the formation of the American Union, he would probably have used some of the same soundbites which Alexis Tsipras used.

The problem with soundbites is that they are never tangible. By defininition, soundbites consist of sounds and not of specifics. The Economic Manifesto is extremely short on specifics. Actually, specific measures are not even included in the presentation but, instead, only in the short Annex 1.

Soundbite 1 - a public register on all properties. SYRIZA deserves 100% agreement and support as regards the absolute necessity of a complete, nation-wide electronic real estate cataster. That is the minimum standard required if one wants to assess property taxes. A society which has administrative problems with the assessment of income taxes must also use the instrument of property taxes.

Where SYRIZA is wrong is when they call for a registry of ALL properties. To declare all personal properties beyond real estate is a confidential matter between the individual and the tax authorities. A property tax form requires the individual to list all his properties and the tax authorities are charged with verifying that.

Soundbite 2 - "internal devaluation". The Google translator suggests that Mr. Tsipras considers internal devaluation as wrong. If this is a correct translation, then it is Mr. Tsipras who is wrong. A country which still as a significant current account deficit after 3-4 years of recession has a massive problem with its real exchange rate. There are only 2 ways to solve that problem: either internal devaluation (the long and drawn-out adjustment) or external devaluation (return to the Drachma). There is nothing in between. And SYRIZA has ruled out a return to the Drachma.

Soundbite 3 - government revenues/expenditures. SYRIZA proposes to reign in expenditures at a maximums of 45% of GDP (presently around 50%) and to increase revenues to about 45% of GDP (presently slightly under 40%). Should SYRIZA accomplish that within the 4 years they say they need, they would deserve a Nobel Prize for Public Administration (n. b.: I suspect that the 45% of GDP expenditures do not include interest. If so, that 45% figure would be far too high and much higher than it is today)! SYRIZA does not explain how they plan to reduce expenditures by another 5% of GDP but they are specific as regards the revenue increase.

Soundbite 4 - tax reform. SYRIZA quotes the Greek constitution as saying that Greek citizens have equal rights and equal obligations to "contribute without distinction to public charges and in proportion to their means". Quite sensationally, SYRIZA seems to include even the Church among those who have obligations. A tax reform following this constitutional mandate could only be good. Details, however, are missing in the Manifesto.

Soundbite 5 - reform public administration. If all the mentioned soundbites were to become reality, Greece would have one of the most modern and efficient public administrations in the world. However, I hasten to add the following sentence which I found somewhere in the Manifesto: "The administration should organize an "invasion" of
democracy, meritocracy and democratic planning in daily operations". That has a very bad sound to it (but perhaps it is poor translation).

Soundbite 6 - nationalizations, etc. Here, SYRIZA gets very ideological about how an economy works. There is a clear mindset that "the state" (or society at large, whatever that means) must play the role of the "visible hand" in the economy. Otherwise, more or less evil forces would begin to take over society. Thus, there can be no thought of privatizing companies which are still state-owned. Instead, the impression is left that one might even look at new nationalizations and in the banking sector they would certainly be planned.

Nationalizations as a tactical measure of necessity can become necessary (examples: the nationalization of AIG; or the partial nationalization of US banks in 2008/09). Nationalization as a strategic goal generally leads to disaster. And Greece is a country which has the advantage of being able to see already what disaster some of its nationalized companies have created.

If the Hellenic Financial Stability Fund has to recapitalize Greek banks, it should certainly get shares for it. However, it would have to pledge these shares to the ECB/ESFS which are refinancing these recapitalizations.

What reactions can be expected to SYRIZA's Economic Manifesto?Some will undoubtedly throw it out the window without reading it simply because it comes from the Left. If Mssrs. Samaras and Venizelos did that, it would be a shame because they could adapt some of the soundbites for their own purposes.

Those who are still doing rather well despite the crisis will definitely object to it because the Manifesto would require a greater future contribution from them. And those who have a vision of Greece as a an attractive place to do business; as as well-functioning economy which is not dependent on subsidies from abroad; as a mature partner in the European Union - well, I regret to say, those should object to it.

And, finally, those who are in the lower half of today's totem pole of Greek society will fall for the soundbites. They will read into the soundbites all those wonderful things which Greeks back in the early 1940s read into soundbites like the one I cited at the beginning of this post. Without wanting to de-motivate those Greeks, I would only alert them to the following Greek wisdom:

"Any fool can throw a stone into the sea, but once he does, a hundred wise men can't pull it out!"